Trade, Transportation and Tourism.

LABI recognizes the direct correlation between a thriving business community and investing in a safe and sustainable transportation system. A modernized infrastructure system across all modes of transportation is paramount in fueling Louisiana’s economy, and LABI is focused on common sense policies and reforms geared to increase statewide productivity, enhance businesses’ ability to move their products across the nation, and remain globally relevant.  

LABI encourages the enactment and enforcement of state and federal laws and policies that promote long-term solutions to Louisiana’s transportation needs, free flow of national and international trade, and the state’s unique tourism attractions.

• State
• Federal

Last week State Farm announced plans to cut Louisiana auto insurance rates, marking the fourth time the state’s largest auto insurance company has lowered rates over the past two years, for a total decrease of 10.4%.

While the series of cuts come as welcomed news to Louisiana drivers, notoriously plagued by high auto premiums, insurance experts are quick to note this doesn’t change the fact that the state’s rates still rank among the highest in the nation.

Nor does it quell the business community’s push for tort reform to address what it sees as systemic issues leading to high auto rates and driving business out of the state.

The rate cuts, first of all, are only for the personal lines market, says Jeff Albright, CEO of Independent Insurance Agents and Brokers of Louisiana. In the state’s commercial market, auto rates have not only not gone down, they’ve risen. 

“The problem is much worse in the commercial lines market,” Albright says. “Rates continue to go up. We’re literally driving business out of the state because of the extremely high costs of commercial insurance.”

Businesses with large fleets of trucks and more risky insurance policies, he says, are struggling to even find carriers because so few insurance companies want to write those policies in Louisiana. 

In the personal market, State Farm is cutting its rates in an effort to recoup some 100,000 customers the company has lost to competitors in recent years, says Albright and Louisiana Insurance Commissioner Jim Donelon. It’s a benefit of having some competition in the market. Louisiana Farm Bureau and Progessive have also cut rates in Louisiana recently, though by smaller percentages.

Albright, however, argues personal market competition is still weak compared to other states, saying there are several carriers that don’t do business in Louisiana. 

Louisiana, which has the second-highest auto rates in the nation, might even move up to the top spot soon, Albright says, following successful legislative efforts in Michigan—which has held the No. 1 spot for years—to reform its auto insurance system and reduce rates. 

“There’s no question we have a systemic problem with auto insurance rates, driven by our highest in America claims-to-litigation ratio,” Donelon says.

While Louisiana’s auto claims are often on par with the rest of the nation, the number of lawsuits related to auto claims is far higher than in other states, Donelon says. 

The state’s powerful business lobbying group, the Louisiana Association of Business and Industry, rallied behind tort reform efforts in the Legislature earlier this year, sponsored by Rep. Kirk Talbot, R-River Ridge, which ultimately failed. LABI, however, plans to continue the fight in upcoming legislative sessions.

Gulf states Louisiana and Texas are among the states that dominate international trade in the U.S., according to a new report by the American Enterprise Institute (AEI).

And depending on the analyst, they could be negatively impacted – or not that much at all – by the ongoing trade negotiations with China.

The author of the AEI report, Mark Perry, professor of economics and finance at the University of Michigan's Flint campus and AEI scholar, ranked each state’s volume of international trade activities as a share of their Gross Domestic Product. The report asks, “How important was international trade for each U.S. state’s economy in 2018?” And answers, “pretty important for most states, putting them at risk from the trade war.”

The average trade share of GDP for U.S. states, excluding the District of Columbia, in 2018 was 17.9 percent, an increase of .7 percent from 2017.

The trade share of state’s GDPs was greater than 30 percent in six states, 25 percent or higher in 10, and 20 percent or higher in 16 states, than the previous year, the report states.

Ranking first is Louisiana with the highest trade share of GDP at 42 percent. The Pelican State is “the most globalized state in the U.S.,” Perry said, based on his analysis of data from the U.S. Census Bureau and the Bureau of Economic Analysis.

Excluding third-place Michigan, the top five states are in the South: Kentucky ranks second (41.4 percent), and Tennessee and South Carolina both rank fifth (32.5 percent).

“Louisiana’s economy is dominated by a strong energy, manufacturing and agricultural presence – all of which depend greatly on international trade in order to maximize its potential,” Stephen Waguespack, president and CEO of the Louisiana Association of Business and Industry (LABI), told The Center Square.

“Over the last decade, we have seen a tremendous increase in liquified natural gas (LNG) exports and chemical expansions thanks to innovations in the energy industry that produce more affordable American energy than ever before,” he added. “Federal efforts to reduce taxes and regulations on these critical markets have helped greatly to enhance these offerings and, conversely, recent state government efforts to increase taxes and regulations on these job providers have thankfully thus far been stymied.”

Louisiana’s exports surged by more than 16 percent in 2018, boosted by a 34 percent increase in petroleum exports and a 47.5 percent increase in LNG exports.

Louisiana’s LNG exports in 2018 accounted for 86 percent of all U.S. LNG exports, which last year reached a record high of one trillion cubic feet.

Louisiana primarily exports to Mexico, South Korea, the Netherlands, Brazil, Canada and China. Exports to South Korea increased by more than 100 percent in one year after the trade negotiations with China began. Exports also increased to the Netherlands by 44 percent, Brazil by 30 percent, and Canada by 32 percent. Exports to China decreased by 61 percent over the same time period.

Louisiana’s neighbor, Texas, ranked fourth.

“As an emerging energy powerhouse, the state of Texas as a separate nation would be the world’s No. 4 oil producer behind the U.S., Russia and Saudi Arabia, and that status has contributed to an increased share of the state’s GDP tied to international trade,” Perry notes.

Texas’ global trade share increased by 3.8 percent from the previous year, accounting for more than 40 percent of U.S. oil production and 24 percent of U.S. natural gas output in 2018. Forty percent translates to 15.94 billion barrels of crude oil reserves, which would fill more than 1 million Olympic swimming pools, according to the U.S. Energy Information Administration.

Through Texas’ 16 seaports and more than 380 airports, exports increased by more than 19 percent in one year.

Texas’ four largest export categories and largest import category in 2018 were energy-related, reflecting the state’s booming oil and gas industries in the Permian Basin and Eagle Ford Shale areas, the report states.

Exports of petroleum products increased by nearly 50 percent to Mexico, Canada, China, South Korea and Japan last year. To put this in perspective, in 2015, Texas sent more than $92.4 billion worth of exports to Mexico, $25.5 billion worth of exports to Canada and $11.5 billion worth of exports to China.

Perry argues that “President Trump's trade war is superficial and short-sighted because it ignores the complexities and dynamics of world markets and global supply chains, and ignores all of the unseen, delayed and hidden costs of trade protectionism that will make many 2016 pro-Trump, but trade-dependent American states like Louisiana and Texas weak again, not great again.”

Waguespack disagrees.

“As we continuously seek feedback from our statewide business membership, it is clear these industries support a national policy focused on free trade and open markets,” he told The Center Square. “They also want to see foreign countries held accountable, to take aggressive steps to respect American intellectual property and trade agreements. The current efforts by the Trump Administration to negotiate new trade deals that better protect these key principles are being watched closely and will hopefully lead to new arrangements that improve prospects for American workers, investment and companies.”

After reviewing Perry’s analysis, Chuck DeVore, vice president of national initiatives at the Texas Public Policy Center, told The Center Square, “Not all trade is the same and not all ‘trade wars’ are created equal. Trade friction with Europe, Canada and Mexico has largely been resolved, leaving the People’s Republic of China as the last, and most significant, holdout for a comprehensive agreement.

“It’s China that will likely see a protracted ‘trade war’ with the U.S. – although, it’s not truly trade that’s at issue, rather, China’s pervasive stealing of American intellectual property, nontariff barriers, and systemic cheating on agreements are at the heart of the current trade tension.”

DeVore also notes that the bulk of Texas’ international trade is in energy imports and exports, and “the international energy market is highly fungible and flexible.”

“Should China shift its energy purchases to the Middle East, the total global demand for Texas’ oil and gas will remain the same,” he adds. “Historically, Texas’ trade with Mexico, Canada and Europe, have been of far greater importance than with China.”

The Louisiana House of Representatives unanimously passed a statewide framework for ridesharing in the state, just as more than 40 states across the country have passed. Now, Louisianians have the opportunity to call on their senators to act by signing the Let’s Geaux Louisiana Coalition’s online petition.

HB 575 now moves to the Senate. For the past two years, similar bills have passed the Louisiana House of Representatives, but did not receive a vote in the Senate.

“For the third year in a row, the House has overwhelmingly passed one clear set of rules for ridesharing in Louisiana,” said Representative Tanner Magee (R-District 53). “Allowing the rest of the state to have access to rideshare services is not a privilege – it is a need. I invite all Louisiana residents to join me in expressing this need to their Senators by signing the petition to pass statewide rideshare legislation in Louisiana, just as more than 40 states across the country have done. The time is now.”

Local elected officials and business leaders in the Let’s Geaux Louisiana Coalition are advocating for a single set of statewide rules for ridesharing companies in Louisiana in an effort to create more economic opportunities and expand access to reliable transportation.

“We owe it to the people of Louisiana to let the free market work whenever possible,” said Stephen Waguespack, president, and CEO of LABI. “Expanding ridesharing in Louisiana is a win/win that will put consumers in control and boost local economies.”

“We need ridesharing in Alexandria to give us more transportation options – from families who lack access to a car to students who need reliable rides home to seniors who need rides to their doctors,” said Alexandria Mayor Jeff Hall. “When I represented Alexandria in Baton Rouge, I supported rules which would bring ridesharing throughout the state. This year, I support the measures again as a mayor. I really believe our legislators will come together to ensure that all Louisianans, even those in smaller communities, have access to affordable and reliable methods of transportation.”

“Central Louisiana deserves the same access to ridesharing that’s available in Louisiana’s biggest cities,” said Pineville Mayor Clarence Fields. “A statewide framework will bring ridesharing to Pineville, giving our residents the ability to earn extra income and get the reliable rides that they deserve.”

“We need Uber and Lyft in Louisiana to help prevent drinking and driving,” said Craig Smith of the Rapides Parish Police Jury. “When people have access to rideshare it’s a benefit to the entire community.”

“This year a bill is being filed again and we’re strongly supporting it along with other chambers and municipalities around the state,” said Deborah Randolph, President of the Central Louisiana Regional Chamber of Commerce President. “Alexandria has a beautiful airport and we deserve to have reliable transportation for visitors into our community as well as for our local residents. Our people tell us that they strongly want these services throughout Central Louisiana. Statewide regulations would end the difficulties of the current patchwork of local ordinances.”

“Rideshare services are a vital and an expected service for businesses and residents in thousands of communities across the country,” said Dr. Tim Magner, President of the Shreveport Chamber of Commerce. “It’s time for Louisiana to join with the more than forty other states in our country that have expanded access to reliable, convenient service in their communities.”

“Our elected officials should be doing everything in their power to keep people safe and keep drunk drivers off the road, which is why it’s time to bring ridesharing statewide,” said Victor Silvio, an Uber and Lyft driver-partner in Baton Rouge who lost his son to a drunk driver. “When people have access to a convenient ride, they make safer choices. Providing more people in Louisiana with access to ridesharing will help keep us all safe.”

The bill establishes one set of rules for the operation of Transportation Network Companies (TNCs) like Uber and Lyft in the State of Louisiana to replace the existing patchwork of conflicting local regulations. The bill requires background screening standards for TNC drivers and includes consumer protection provisions that strengthen the community of riders and drivers in Louisiana with requirements such as fare transparency, electronic receipts, and ease of identification of TNC vehicles and drivers.

For more information about on statewide ridesharing legislation and how it will help Louisiana, visit https://geauxridesharing.com/. To sign the petition in favor of statewide rideshare, check the “Related Links” tab.

Copyright 2019 The Ehrhardt Group. All rights reserved.

By: Stephen Waguespack

Thomas Jefferson once said, “With great risk, comes great reward.” While that may be a great way to describe the revolution that resulted in the greatest nation the world has ever known, we all know by our own experiences this saying is not always the case in life.

Bold investments don’t always pan out. Aggressive trades can come back to haunt you. Leaps of faith sometimes lead to a hard crash back down to earth.

Right now, a great risk is being taken with the American economy in the hopes it will lead to a great reward. Only time will tell if it will work.

The nation’s economy is booming. Gross Domestic Product (GDP) is up 4.2% this quarter, the strongest pace in four years. Profits, once inventory and capital adjustments are made, are up 16%, a six-year high. Consumer confidence is the highest since October 2000. Federal Reserve Chairman Powell said just last week, “The economy is strong… most people who want a job are finding one.”

Why are we seeing this growth? The answer is smart national policy decisions.

Last year, Congress and the President passed tax relief intended to spur domestic investment and repatriate dollars back to the U.S. The tax package included, among other things, a major reduction to the corporate tax rate (from 35 percent down to 21 percent). That’s a big reason profits are higher, leading to increased investment and more job opportunities for American workers.

Also, there has a been a continued focus on reducing regulations and red tape over the last two years. Since taking office, President Trump’s administration has repealed 22 regulations for each new rule or regulation put in place. This focus has lifted the wet blanket that had previously smothered economic growth across many industries and ushered in a new level of confidence in employers of all sizes.

Momentum is building, and the economy is growing. But a new risk is being taken with this momentum and the balance between risk and reward is a moving target.

Trade tariffs have been implemented by the administration in the hopes of finally bringing to light some solutions to long-standing problems. For years, America has fought to no avail to bring China to the table and end theft of our intellectual property, lower harmful tariffs on our products and improve the treatment of their own workers. Our trade deficit with China last year reached a staggering $375 billion, roughly 65 percent of the entire U.S trade deficit. That percentage is not sustainable, and China is long overdue for being called to the carpet on these issues.

But are tariffs really the best way to get there? President Trump says, in the long run, the answer is no, but in the short term, it must be yes. He is implementing new tariffs today but his long-term goal is quite different, as described in June when he said, “You go tariff-free, you go barrier-free, you go subsidy-free…  I mean, that would be the ultimate thing.”

That end game sounds good to me. Get governments across the globe out of the market as much as possible and let consumer demand and business investment drive economic growth. Left to its own devices, I have confidence that American buying power, ingenuity and market share will have a great shot at doing very well in that type of competition.

The question is whether the risk of damaging short-term trade tariffs is worth the possibility of better trade deals with countries like China on the back end? It’s a question lots of businesses and economists are asking themselves these days.

Louisiana has more than 550,000 jobs supported by international trade. 136,600 of those jobs are created by Louisiana manufacturers, pumping out 21 percent of the state’s gross state product and paying an average annual compensation of $87,212. Roughly $30 billion in manufactured goods were exported from Louisiana in 2106, with about 40 percent of that amount going to our 20 free trade agreement partners around the world.

One such Louisiana manufacturer is Laitram LLC. Based just outside New Orleans, this Louisiana success story started in the 1940’s when it patented the world’s first automated shrimp peeling machine and has grown through hard work and smart planning to an employer of 1,900 people across the globe. They are a fantastic community partner and have stepped up time and time again through the years to help Louisiana in countless ways. They also were one of many American manufacturers riding a euphoric wave of economic optimism in the last year thanks in part to smart federal regulatory and tax relief. But now, due to the temporary use of trade tariffs, anxiety and concern are setting in.

“In the first five months of the year, we saw remarkable growth due to regulatory and tax changes, but in June our booking was soft, in fact lower than last year,” said Laitram CEO Jay Lapeyre. “What we know is these tariffs have put us in a competitive disadvantage to foreign manufacturers of equipment.”

That’s a problem if the very same tariffs being used to fight unfair trade challenges with other countries are in fact giving a leg up to foreign manufacturers as they compete with American, home-grown manufacturers here in Louisiana. We don’t want to incentivize U.S. companies to import foreign manufactured goods built with cheaper steel, inadvertently punishing American manufacturers that use steel to make their products here at home.

As for the Louisiana Association of Business and Industry’s members, a recent survey tells us the immediate impact of the tariff game is evenly split between those positively affected, negatively affected or not affected at all.

Trade is the lifeblood of Louisiana. The stated goals to improve U.S. trade policy are noble: the deficit must be reduced, American manufacturing must be re-energized and other countries must protect our intellectual property and lower their tariffs on American goods. But the tactics currently being used to get there are, without question, risky.

The President is right to describe the ideal trade policy as “tariff-free… barrier-free… subsidy-free.” The question is whether his flirtation on the short term with these tariffs will eventually lead to such an ideal long-term policy? And if so, when?

Only time will tell if this risk is worth the potential reward. Let’s hope Jefferson was right. 

By: Stephen Waguespack

Much has been said about the recently concluded 2015 legislative session, though not much of it has been positive. The predominant message coming out of this two-month saga is simply “thank goodness it’s over.”

The Legislature voted to raise taxes on employers and individuals by more than $700 million this year in 12 different bills that will collectively have a five-year impact of more than $2.2 billion. The governor is expected to sign all 12 bills into law. These new taxes will broadly affect employers of all sizes and industry sectors. Removing dollars of this magnitude out of Louisiana’s economy, with such rapid and broad strokes, in order to fund government will undoubtedly have an impact on the state’s economic growth.

Throughout this session, the chorus emanating from the Capitol from most legislators was that raising taxes was their only choice to fund higher education and health care…that their hands were tied and they had no other available options. In reality, there were many other options on the table, such as making long-needed strategic reductions in government spending, reforming the state’s budget to undedicate the litany of statutory dedicated funds that currently prohibit roughly $1.3 billion from being used for critical services, restructuring the generational high levels of state support for local government that continue to rise every year, giving higher education the same full tuition autonomy enjoyed by its competitors in other states and updating Louisiana’s pension systems to make it more efficient to taxpayers.

The financial decisions made this session to address a budget challenge were simply a taxpayer-funded Band-Aid to hide a larger budget structural disease. Band-Aids don't heal wounds like that, the problem is only going to get worse until aggressive, and targeted treatment is pursued. Let’s hope next year's fiscal special session that every gubernatorial candidate has promised can provide a treatment that prioritizes taxpayers and economic growth over protecting the populist approach of the past that again took hold this session.

Having said all of this, transportation funding thankfully received good news this session.

Every resident in the state is aware of the significant challenges Louisianans face when it comes to transportation. Louisiana receives a “C-“ on the report card for America's Infrastructure, we rank No. 44 in urban interstate conditions, and the state’s road maintenance backlog is roughly $12 billion. This challenge, while annoying for all of us during our daily commute, is even more pressing as we attempt to rebuild and diversify the state’s economy through providing a reliable transportation system to meet the needs of our current employers and also prepare for the growth Louisiana is experiencing in energy, manufacturing, exports and new markets.

The first step for meeting this challenge is better utilizing the dollars we have today for infrastructure.

Since 2005, the state has diverted over $400 million from the Louisiana Transportation Trust Fund (TTF) to the Louisiana State Police (LSP) for the function of traffic control. While this is obviously a noble and necessary service, 71 percent of Louisiana voters approved a gas tax in 1989 for improving transportation infrastructure.

LABI worked very closely this session with Rep. Terry Landry to pass House Bill 208, a bill to ensure taxpayer dollars dedicated to the TTF are utilized for highway maintenance and construction by gradually limiting the amount that may be appropriated to LSP, beginning with a $45 million cap in fiscal year 2016, $20 million in fiscal year 2017 and $10 million in fiscal year and every year going forward. This bill will go a long way to protecting the commitment made to taxpayers that TTF dollars will be used for infrastructure, while separate bills also passed this session to fund state police operations through other sources going forward.

It is estimated that an annual minimum of $70 million is necessary to meet the federal match requirements for a reliable transportation preservation program. This year, Louisiana dedicates approximately $26.7 million to match federal funds under a restructured preservation program focused mainly on interstate highways. House Bill 208 will help set the foundation for having that match requirement in place each and every year.

Other LABI-supported legislation also passed this session.

Senate Bill 122 and Senate Bill 221 by Sen. Robert Adley will have the effect of raising the mineral revenue base from $850 million to $950 million before the allocation to the state general fund. Doing so secures up to $100 million beginning in fiscal year 2017-2018 and each year thereafter to transportation infrastructure projects. This measure dedicates the first $70 million of the new total monies into the TTF to be used exclusively for state highway pavement and bridge sustainability projects in accordance with the Louisiana Department of Transportation and Development definitions of projects. The majority of the remaining dollars will be split between highway priority program projects, port investments, and seed funding to the proposed Louisiana State Infrastructure Bank.

This new infrastructure bank was created this session by House Bill 767 and House Bill 618 by Rep. Karen St. Germain and is intended to assist in financing eligible transportation projects.

While our infrastructure needs are great and additional reforms will be needed to build and maintain the system we have long sought, securing the TTF, prioritizing more of our mineral revenues for infrastructure improvements and developing incentives to encourage local stakeholders to invest more of their dollars in infrastructure are critical first steps.